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What is ESG reporting? And why should it be your organization’s new focus?

Climate change and the environment are fast becoming the number 1 priority for organizations worldwide, with the conclusion of 2021’s COP26 in Glasgow, Scotland. New goals for a net-zero world by 2045 had driven many companies and governments into overdrive. Because of this, ESG reporting is now an essential task in ensuring that your organization is following legislation and allowing investors to understand your organization’s forward-thinking goals and culture.

This article aims to discuss ESG reporting, what it entails, and why it is crucial to implement it into your organization’s business reporting and strategy.

What is ESG reporting?

ESG stands for Environmental, social, and governance. However, these three topics cover a broad remit, once brought into a report. It gives a top-level understanding of how socially responsible an organization is.

Many organizations look to third-party groups to give a scoring of their business. These scores can heavily impact their perspective on consumers and also potential investors.

What does ESG report Measure?

Although an ESG report covers three major areas, several aspects within an organization are focused on within the structure of its mission statement. These include:

Environmental:

When looking at the ESG report, the environmental impact of the organization is strictly reviewed looking at factors such as:

  • The company’s energy use can include traditional aspects such as travel and factories but in more modern times consists of the use of cloud servers and digital infrastructure.
    If the organization is contributing to pollution in local areas and worldwide.
  • The treatment of wildlife from either testing or destruction of natural habitat.
  • The output of carbon monoxide into the ozone layer.

These factors are continuously in flux due to the ever-changing environmental and political environment. An example of this is if an organization begins using potentially harmful materials that impact the environment, it must have plans to deal with and mitigate the potential damage caused.

Without this in place, investors and the public will view the company as detrimental to the world and potentially not invest.

Social

The social aspect of the ESG report refers to the organization’s activity regarding their internal practices, local involvement with non-profit organizations. Examples of this activity are:

  • Diversity within their hiring.
  • Creating an inclusive environment for employees.
  • Dealing with customer
  • How they impact their local community through charitable efforts.

Showing deep-rooted care in social responsibility and social issues positively impacts an organization’s reputation and hiring ability. If it can become a place for employees to feel valued, then longer retention can be achieved.

Governance

Governance regarding ESG reporting refers to how well your organization is structured and run. This can refer to both the internal teams, such as reviewing it is working towards the most recent industry trends, and there is a secure chain of governance that assists in large-scale decision-making.

As well as this, research will be done on board members to ensure no conflicts of interest that may harm the business or allude to any illegal collusion.

Why is ESG reporting important?

As previously stated, a business’s social responsibility is becoming the prevalent factor in the eyes of both the consumer and investor. These factors can be broken down into three significant aspects:

Accountability

ESG reporting gives a chance for key decision-makers such as the board of directors or investors to be held accountable for their stance on ESG issues. This allows for actionable results to happen, which will help positively impact the business.
Without accountability, organizations have the potential to be outspoken about positive change however do not change behaviors to match this. Regarding ESG issues, this is referred to as “greenwashing,” which is seen as highly damaging.

Visibility

As well as traceability, being a totally visible and transparent organization is essential. This allows you to see your business objectives regarding social issues such as gendered-based pay issues. If within organizational reporting, this is not dealt with correctly. It can negatively affect the business’s values to potential investors.
Having a robust ESG report in place can give investors an insight into all of the actions you, as an organization, is making to improve as an organization, as well as provide an accurate interpretation of your business as a whole

Confidence

Allowing investors to have confidence in your business is essential. Having an ESG report allows for clear information to be collected into one source, allowing potential investors to understand your business practices and confidence to invest if they believe it’s something beneficial to them.

Companies that do not provide an ESG report risk showing a lack of transparency, and investors may overlook them due to it.

How to get a good ESG score?

It is a commonplace for organizations to enlist the help of third-party inspection agencies to create an ESG report. They use industry practice and methodology knowledge to create something that genuinely encapsulates your organization’s maturity. The three major aspects are looked at within the scoring criteria.

  • Have clear goals set in place with roadmaps to achieving them.
  • Develop precise measurement and execution frameworks to measure the impact of processes on the environment
  • Make ESG reporting an integral part of all organizational processes and decision-making, ensure that it is not an afterthought.

 

In conclusion, ESG reporting is becoming ever more essential for organizations to keep up to date with moral and ethical practices and expectations of the modern world. Therefore, this must become a priority in developing clear goals and frameworks to allow for transparent reporting to be shared with investors, giving peace of mind and confidence in your organization.

HQTS has over 25 years of experience with inspection services in industry-leading quality control, including machinery testing. Focusing a wide range of services such as in-depth laboratory testing, functionality testing, and supplier audits to ensure all goods are of quality and comply with the regulatory body’s requirements.

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